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Skills Base

rose to call attention to the development of the United Kingdom’s skills base; and to move for Papers. The noble Lord said: My Lords, it is my privilege to move this Motion on skills and to speak on this auspicious first day of a new Prime Minister. Two years ago I was asked by the Government to undertake an independent review of the UK’s long-term skill needs in order to, "““maximise economic growth, productivity and social justice””." The year 2020 was the focus of my review. But, before looking forward, let us look back. In the 19th century the UK had the natural resources, the labour force and the inspiration to lead the world into the Industrial Revolution. Today we are witnessing a different type of revolution. Developed countries simply cannot compete on natural resources and low labour costs. In the 21st century our natural resource is our people, and their potential is both untapped and vast. Skills will unlock that potential. There is a direct and irrefutable correlation between skills, productivity and employment. And employment heavily influences levels of social mobility, poverty, health and crime. It is encouraging to see the progress made in the six months since the review ended. The Government recently announced they would soon publish their response to my review—the Leitch implementation plan. I am pleased that they decided to implement me rather than to execute me. Let us look at where we are today. In many ways this is the best of times for the UK economy. We are the fifth largest economy in the world and now into a remarkable 59th quarter of continuous economic growth. Our employment rate is the highest in the G7, and there are 2.5 million more people in work than a decade ago. This is a strong position and proof that we do many things incredibly well. Yet, despite these very real achievements, our productivity record remains an Achilles heel. We are distinctly average; and on key matters we are well behind France, Germany and the United States. Employment rates for disadvantaged groups have risen in recent years, but they are still far too low. Child poverty remains disturbingly high. Social mobility is poor. The correlation between parents’ income and that of their children is higher here than in many other countries. Today, the children of richer parents are six times more likely to go to university than children from poorer families. As we all know, the global economy is changing rapidly, challenging UK competitiveness. Emerging economies are growing rapidly; mortality rates are improving dramatically; technology advances at a furious pace. The progress of China and India is both awesome and inexorable. China has become the workshop of the world and India the IT department of the world; they are so hungry to compete. We face enormous challenges, but also brilliant opportunities. We cannot and should not try to protect our people from change. Instead, we must prepare people so that they can make the most of change. Skills are the way to do that. High skills are vital to leadership, management and innovation, key drivers of productivity and creators of wealth. Demand for high-level skills is rising at a rapid rate. Vocational skills are essential for the day-to-day delivery of output, but their value is so often underrated. The employment opportunities for the least skilled continue to decline. People lacking basic skills become increasingly isolated from the labour market—a lost generation. How do UK skills stack up against that enormous challenge? Our skills base has suffered from long-standing failures in the education and training system going back more than 50 years. Recent years have seen big improvements. Standards in schools have risen. The number of adults qualified to degree level has increased significantly. The proportion of people with no qualifications has almost halved. That is very good progress. But other countries have sustained higher investment and achievement. We remain desperately weak by international standards. Of the 30 countries in the OECD, the UK ranks 17th in basic skills, 20th in intermediate skills and 11th in graduate skills, where we invest less than many of our competitors. Worryingly, 6 million adults across the UK lack functional literacy—the skills that they need to get by in life. More than 7 million adults lack functional numeracy—even the most basic skills, such as checking your change in a shop. Where we are today is simply not good enough. It is not good enough for the millions who will lose their chance of work; it is not good enough for business, whose success is determined by productivity and innovation; and it is not good enough for society. Those who miss out on jobs are far more likely to live in poverty and in poor health. In every country that I visited during my review, the sense of urgency to improve skills was palpable. In the US, I heard it called a simmering crisis. Many countries are improving further and faster than us and often from a higher base. We are running just to stand still. We will remain trapped in a undistinguished mediocrity. We must raise our game. It is critical that we develop an all-party and UK-wide consensus about our skill needs. What do we do? The starting point is to set up a compelling vision for the UK. I have recommended that the UK should become a world leader in skills by 2020, benchmarked against the upper quartile in the OECD. World-class skills will require very significant improvement at every level. By 2020, we must help all working-age adults to reach basic standards of literacy and numeracy. We should forget the argument about whose fault it was and just get on with making things better. Adults should be given a second chance to achieve a level 2 qualification—the vocational equivalent of five GCSEs. At intermediate level, we should boost the number of apprentices to at least 500,000. In higher education, which is so vital to the creation of wealth, we need to increase the number of people at degree level to more than 40 per cent of adults. We could spend all this debate talking about schools and unemployed young people. Both are incredibly important, but that will not be enough. Even if we solved youth unemployment and all schools were perfect, we would have to wait more than 30 years to fully benefit the UK workforce. Seventy per cent of the 2020 working age population are already over the age of 16 today. The flow of young people into the workforce will actually reduce towards 2020; so solutions do not lie exclusively with helping those at school. That is why my focus was on upskilling and retraining adults. Five principles must underpin the delivery of this world-class vision. First, responsibility must be shared. Employers, individuals and the Government must all increase their action and investment. We must invest more in skills. Employers and individuals should contribute the most where they gain the greatest returns, and the Government must target help where it is needed the most. Secondly, we must focus on economically valuable skills. Skills must benefit individuals through higher wages and businesses through improved productivity and bottom-line performance. Thirdly, skills must be demand-led. The skills system must genuinely meet the real needs of individuals and employers. Fourthly, the system must adapt and respond. No one can read minds or tell the future. We cannot accurately predict the future demand for particular skill types. The skills framework must react to future market needs. Finally, we need to build on existing structures, and to improve the performance of current complex structures through simplification, rationalisation, stronger performance management and clearer remits. My recommendations included an employer-led commission for employment and skills to strengthen the voices of employers and advise government on progress towards 2020. I am particularly pleased that Sir Michael Rake has been appointed as the first chairman. He will bring a wealth of experience. I am also delighted that both the TUC and the CBI will play a full part in the commission. Sector skills councils should have a stronger role in articulating what employers need from the skills system, encouraging employers to participate and to invest more money in training at all levels. However, the performance of those councils has been patchy. Provided that they are reformed, re-licensed and refocused, they will become a powerful employer voice. In the past, we have tried too often to predict and provide the skills we will need from the top down. This is always done with the best of intentions, but central planning, no matter who does it, is not effective. We need a much more decentralised skills system. Consequently, the role of the Learning and Skills Council must change. It should be streamlined further so that FE colleges and other providers have more freedom to respond directly to the needs of employers and individuals. I am enthusiastic about the principles of the Train to Gain Programme in England and apprenticeships throughout the UK. Both schemes should be dramatically expanded and extended to higher levels. As a nation, government, employers, trade unions and individuals all need to raise their sights and commit themselves to a greater ambition for skills. For employers, I recommended a skills pledge to offer training to all employees who do not have basic or level 2 skills. Employers will be able to access this, at no cost, through the Train to Gain Programme. More than 150 employers with a total of 1.7 million employees have already signed up to the skills pledge. This is astonishing progress, and we have a great champion for this initiative in Sir Digby Jones. But if the rate of improvement is insufficient by 2010, the Government should introduce a statutory entitlement to workplace training in consultation with employers and trade unions. In general, however, I am against compulsion, and I hope that this will not be necessary. Just as employers must raise their sights, so too must individuals. Just think how much wasted talent there is, and how much innovation and creativity is stifled by a lack of skills. We have not only an economic imperative but a moral requirement to do better. We need to build a stronger culture of learning and embed aspiration across the land—in every school, in every family and in every workplace. We must start with a nationwide campaign to raise that awareness, backed up by easily accessible and focused careers advice. We all know that too many low-skilled people are out of work. We urgently need to place skills at the heart of welfare to work programmes. At present, our skills and employment systems often have conflicting priorities. Both should be united behind a single aim of sustainable employment and progression. Only then can we avoid hundreds of thousands of people being trapped in an endless revolving door between work and welfare. In conclusion, this review took me two years to complete—it felt like 10—and it has been difficult to do it justice in something like 14 minutes. In essence, in tomorrow’s global economy, I strongly believe that skills will be the key lever within our control for improving both economic performance and social justice. By working together we can rise to the challenge and make our workforce one of the best in the world. The more I have immersed myself in this incredibly complex subject, the more passionate I feel about the importance and the value of skills. They are vital if we are to maintain and improve our prosperity. The economic prize is absolutely huge, but the real prize is altogether even richer and deeper. It is about pride, fairness and quality of life for everyone in the UK. Let me tell you, investment in people is quite simply the best investment we will ever make. I beg to move for Papers.